Consumer confidence less pessimistic for Q4 2020

Consumer sentiment is less pessimistic for Q4 2020, turns positive for Q1 2021, and remains optimistic for the next 12 months^[1]

The country’s consumer outlook was less pessimistic for Q4 2020 as the overall confidence index (CI) increased to -47.9 percent from -54.5 percent in Q3 2020.^[2]

According to respondents, their improved outlook during Q4 2020 was brought about by their expectations of: (a) availability of more jobs and permanent employment, (b) additional and high income, (c) effective government policies and programs such as the Social Amelioration Program (SAP) and the Plant, Plant, Plant Program, and (d) less community restrictions, reopening of businesses and end to COVID-19 pandemic.

For Q1 2021, the CI reverted to positive territory at 4.3 percent from the Q3 2020 survey result of -4.1 percent for Q4 2020.

Consumers cited their anticipation of: (a) availability of more jobs and more working family members, (b) additional and high income, (c) an end in the COVID-19 pandemic as well as the discovery of COVID-19 vaccine, and (d) reopening of businesses as reasons behind their optimism for Q1 2021.

Meanwhile, consumer’s outlook for the next 12 months remained optimistic as the CI was at 23.6 percent, although slightly lower than the Q3 2020 survey result of 25.5 percent.

Consumer confidence improved across the three component indicators and for low- and middle-income groups for Q4 2020.^[3]

For Q4 2020, consumer sentiment on the three indicators improved, although the CI remained negative as compared with the Q3 2020 survey results. Likewise, for Q1 2021, consumer sentiment across indicators was more favorable compared with the outturn in Q3 2020 survey round, particularly on the economic condition and family financial situation, where the CIs reverted into the positive territory.

Meanwhile, for the next 12 months, consumer confidence for family financial situation and family income was less optimistic while sentiment on economic condition remained steady compared with the Q3 2020 survey results.

By income group, the improved confidence for Q4 2020 stemmed from the less negative outlook of the low- and middle-income groups, outweighing the more pessimistic sentiment of the high-income group. The availability of more jobs, additional and high income, and effective government policies and programs were the common reasons cited for the improved outlook for Q4 2020.

Further, consumer confidence for the low-income group was less pessimistic as they anticipated less community restrictions amid the COVID-19 pandemic. For Q1 2021, the sentiment of consumers across income groups turned optimistic compared with the Q3 2020 survey results.

Meanwhile, for the next 12 months, the consumer outlook was less upbeat for the high-income group but remained broadly steady for the low- and middle-income groups, compared with the Q3 2020 survey results.

Spending outlook remains record low

The households’ spending outlook index on basic goods and services was unchanged at 26.4 percent for Q1 2021, still the lowest CI recorded since the start of the nationwide survey in Q1 2007.

 

Buying sentiments

The percentage of households in the country that considered Q4 2020 as a favorable time to buy big-ticket items (i.e., consumer durables, motor vehicles, and house and lot) fell to a record low of 11.4 percent since Q1 2007. Meanwhile, the country’s buying intentions for the three big-ticket items for the next 12 months remained steady at 4.8 percent from 4.5 percent recorded in Q3 2020.

 

Households with savings

For Q4 2020, the percentage of households with savings slightly rose to 25 percent from 24.7 percent in Q3 2020. The slight increase in the number of savers was mainly due to the higher number of households with savings in the high- and middle-income groups counterbalancing the decline in the number of savers in the low-income group.

Among savers, the majority or 74 percent kept their money in a bank for Q4 2020, a record high since Q1 2013. As such, considering the aforementioned, the percentage of households with savings accounts at banks increased to 18.5 percent in Q4 2020 from 17.5 percent in Q3 2020. Meanwhile, 57.5 percent kept their savings at home and 47.9 percent considered other institutions such as cooperatives, paluwagan, other credit/loan associations, or in investments (e.g., insurance, microfinance, and stocks).

 

Consumer expectations

The survey results showed that consumers anticipated the interest rates to increase for Q4 2020, Q1 2021, and the next 12 months. Respondents also expected that the peso will appreciate for Q4 2020, but will depreciate for Q1 2021 and the next 12 months. Further, respondents expected that the unemployment rate would rise for Q4 2020 and Q1 2021, but decline over the next 12 months. Households anticipated that the rate of increase in commodity prices will remain within the government’s inflation target range of 2 to 4 percent for 2020 and 2021—at 2.6 percent for Q4 2020, 2.7 percent for Q1 2021, and 2.9 percent for the next 12 months.

The number of OFW households that utilizes their remittances for the purchase of food and other household needs decreased for Q4 2020.

For Q4 2020, 96.6 percent of the 353 OFW households (from 97.2 percent in Q3 2020) indicated that remittance proceeds are used to purchase food and other household needs. The percentage of OFW households that apportioned their remittances for medical expenses (53.8 percent), savings (33.4 percent), purchases of consumer durables (19.3 percent) and motor vehicles (6.2 percent) were higher compared with the Q3 2020 survey results. However, the proportion of OFW households that allotted part of their remittances for debt payments (15.9 percent), investments (6.2 percent) and purchase of houses (4.8 percent) declined, while unchanged for education (at 60.1 percent) when compared with the Q3 2020 survey results.

About 1 in every 5 households availed of a loan in the last 12 months, of which, 84.1 percent experienced ease in debt application.

For Q4 2020, about 1 in every 5 households, or 22.4 percent, reported that they availed of a loan in the last 12 months, of which, 84.1 percent of the respondents found it easy to apply for a loan. However, the remaining 15.9 percent found it difficult due to the following concerns: (a) numerous requirements, (b) long processing time, (c) high interest rate, and (d) low income/no permanent employment.

The Q4 2020 CES was conducted during the period 1 – 13 October 2020. The CES samples were drawn from the Philippine Statistics Authority’s (PSA) Master Sample of Households, which is considered as a representative sample of households nationwide. The CES sample households were generated using a stratified multi-stage probability sampling scheme. For the Q4 2020 CES, 5,612 households were surveyed. Of the said households, 2,828 (50.4 percent) were from NCR and 2,784 (49.6 percent) from AONCR.

Of the said sample size, 5,437 households responded to the survey, equivalent to a response rate of  96.9 percent (from 97.8 percent in the Q3 2020 survey). The respondents consist of 2,775 households in NCR (with 98.1 percent response rate) and 2,662 households in AONCR (with 95.6 percent response rate). Most of the respondents were from the low-income group (38.9 percent), followed by the middle-income group (35.5 percent) and the high-income group (25.6 percent).